 INVENTORY COSTING: A COMPREHENSIVE CASE STUDYPeter Harris and Umapathy Ananthanarayanan Review of Business and Finance Studies, 2019, vol. 10, issue 1, 15-24 Abstract: Under Accounting Standards Update (ASU) 330, Inventory requires an entity to measure inventory at lower of cost or market. Market value can be determined in three methods: replacement cost, net realizable value or net realizable value less profit margin. The Federal Accounting Standards Board (FASB) received comments from users that the current guidance on the measurement of inventory is unnecessarily complex because there are three potential outcomes to determine market. In response to these concerns, FASB issued ASU 2015-11 to simplify the measurement of inventory as part of the FASB’s Simplification initiative. In this paper, we outline the new mechanism proposed by FASB for measuring inventory and how it would impact entity’s financial statements. We provide a series of comprehensive questions relating to Lower of Cost and Net Realizable Value, and Lower of Cost or Market at the end of the paper. This case study is best suited for the Intermediate Accounting 1 course Keywords: ASU 2015-11; ASC 330; Lower of Cost or Market; Lower of Cost or Net Realizable Value; Net Realizable Value; FIFO; LIFO; Replacement Cost; Inventory Floor (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ibf:rbfstu:v:10:y:2019:i:1:p:15-24 Access Statistics for this article Review of Business and Finance Studies is currently edited by Terrance Jalbert More articles in Review of Business and Finance Studies from The Institute for Business and Finance Research |
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